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Beware of the Devil in the Details—What Employers Should Do and Need to Know about the Kansas Wage Payment Act Amendment
05/21/2013

Last month we told you about the amendment to the Kansas Wage Payment (KWPA), which goes into effect on July 1. In short, the changes greatly expand the circumstances under which employers may make payroll withholdings or deductions without violating the KWPA. To maximize your organization’s ability to avail itself to these new provisions, you should consider having employees (at least the non-exempt ones) sign agreements prospectively authorizing deductions to cover any past or future payroll overpayments, loans, advances, or failure to return or pay for employer-provided merchandise. But be careful in applying your new rights under the KWPA to exempt employees.  Even if making a certain deduction is allowed by Kansas law, doing so could present potential liability under the federal Fair Labor Standards Act (FLSA).  Read on to understand why.

Under the KWPA amendment, employers are now authorized to make the following deductions and withholdings.
 
First, upon a signed written agreement between the employer and employee, an employer may deduct or withhold an employee's wages for the following purposes:
 
  1. as repayment of a loan or advance the employer made to the employee during the course of and within the scope of employment;
  2. to recover a payroll overpayment; and
  3. to compensate the employer for the replacement cost or unpaid balance of the cost of the employer's merchandise or uniforms purchased by the employee. 
Second, upon providing written notice and explanation to the employee (even if there is no written agreement), an employer may deduct or withhold an employee's final wages (in other words, after separation of employment) for the following purposes:
 
  1. to recover the employer's property provided to the employee in the course of the employer's business, including but not limited to tools of the trade or profession, personal safety equipment, computers, electronic devices, mobile phones, proprietary information such as client or customer lists and intellectual property, security information, keys or access cards or materials until such time as such property is returned by the employee to the employer (although, upon return of the employer's property, the employer must pay the wages being withheld);
  2. as repayment of a loan or advance the employer made to the employee during the course of and within the scope of employment;
  3. to recover a payroll overpayment; and
  4. to compensate the employer for the replacement cost or unpaid balance of the cost of the employer's merchandise, uniforms, company property, equipment, tools of the trade or other materials intentionally purchased by the employee. 
However, an employer cannot withhold amounts under these new provisions that cause the wages paid to the employee to be less than the federal or state minimum wage, whichever is applicable.  So if you make a deduction from an employee’s wages that results in the employee not being paid at least the minimum wage for that pay period, you would violate both the KWPA and the FLSA. 
 
What can you do now to put your organization in the best position to take advantage of the new opportunities afforded by the KWPA amendment?  Because the newly authorized deductions for current employees require a written agreement signed by both parties, employers would be wise to require employees, as a condition of employment, to sign such agreements prospectively.  These agreements, at least the ones for non-exempt employees, would authorize your organization to withhold or deduct wages in the event the employer ever makes a payroll overpayment, loan, or advance to the employee, or the employee ever fails to return or pay in full the cost of any employer merchandise or uniform purchased by the employee.  But such agreements may need to be more narrowly tailored for exempt employees.    
 
Remember that employers are subject to both federal and state law, and federal law trumps state law.  So even if the new KWPA says you can do something, you need to think carefully about the ramifications your actions may have under the FLSA.
 
Generally, under the FLSA exempt employees must be paid their full salary for any week in which they perform any work, regardless of the number of hours or days worked, or in which they are ready, willing, and able to work but unable to do so only because no work is available. A handful of very limited exceptions apply.
 
The U.S. Department of Labor takes the position that deductions not explicitly permitted by regulation, which would include some of those under the new KWPA, are inconsistent with the salary basis rules and thus impermissible. And an employer that makes improper deductions can jeopardize the exemption for not only the employee in question but also other employees in the same job classification. 
 
The takeaway here is that the interplay between the new KWPA deduction amendments and the FLSA can get tricky.  So work with an experienced employment lawyer to help draft withholding agreements and know when you can, and when you can’t, rely on these new deduction and withholding opportunities to get back what’s yours. 
 


Editors
Don Berner Image
Don Berner, the Labor Law, OSHA, & Immigration Law Guy
Boyd Byers Image
Boyd Byers, the General Employment Law Guy
Jason Lacey Image
Jason Lacey, the Employee Benefits Guy
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